LightFair International, the large lighting trade show, will take place next week, and the discussions there will likely center around LEDs.
But don't be fooled into thinking that the market swirls around those small chips that emit light. The new kings of the industry are the light fixture makers.
Fixture makers? The people who make night lights and light bulbs? Lamp makers? Aluminum benders?
It sounds strange, but look at the evidence:
--Cree, one of the top LED manufacturers in the world, will use the event to showcase a ceiling fixture powered by LEDs that can replace those fluorescent bulb ceiling fixtures seen in almost every U.S. office building. It will be Cree’s main announcement at the show.
General Electric will show off a similar fixture, powered in part by intellectual property from Rambus.
--Lunera, a Silicon Valley startup founded by lighting designers who used to work in fashion photography, will show off ceiling fixtures too. Existing customers include Facebook, Google, Apple and Stanford.
--Switch will show off its liquid-filled light bulb at the event. The liquid in the bulb effectively spreads the heat from the electronics better, which in turn allows Switch to reduce components and improve performance at the same time. The bulb will cost around $25 or less when it hits shelves in the fourth quarter.
--Lighting Science, meanwhile, will be on hand to talk about the networked light bulb it will produce with Google. It will also show off a liquid-filled bulb, sources tell me.
--The big announcement from Bridgelux, which makes LED chips, is a new version of its light module, which replaces ceiling fixtures.
All of the above announcements revolve around a lamp or a bulb, and not the thing (the LED) that actually produces light.
You might argue that I’m splitting hairs. Each one of these bulbs and fixtures are based around LEDs. LEDs, thus, are still the central story in lighting. Solid state lighting will evolve like the PC industry, you might argue. Compaq, Packard-Bell, Hewlett-Packard and IBM all made desktops and laptops but Microsoft and Intel reaped the profits.
The fundamentals of lighting, however, are very different:
1. The product lifetimes will be much, much longer.
The average PC or notebook lasts five years. LED lights will last 10 to 20 years. No replacement market will exist. Manufacturers will need to capture as much revenue as possible with the initial sale -- and that means being as close to the customer as possible. Thus, the advantage lies with the bulb and lamp makers.
2. The intellectual property base is different.
In the PC market, IBM gave Microsoft and Intel the right to sell their products to third parties under the mistaken assumption that third parties couldn’t emulate things like the BIOS, a piece of software in PCs. Compaq and others did. Instead of driving the market, IBM found itself just one of many brand names on the shelf.
By contrast, Microsoft and Intel kept a tight lid on licensing. If you wanted to make PCs, you ultimately had to contribute to their coffers.
The LED market isn’t a duopoly. Instead, it’s an oligarchy. Cree, Osram, Lumileds, Nichia and a few others produce the best LED chips in the world. Even in China, lamp and fixture makers have begun to advertise that they put Cree LEDs in their bulbs and not the cheaper counterparts from Chinese manufacturers.
A few startups, like Bridgelux, may join the club with their silicon LEDs, but don’t expect the top tier to spread beyond five or six names.
Oligarchy members will make money, and hold valuable patents, but their power will erode over time. Lamp makers, after all, can mix and match components. If Osram’s prices are high one year, you can switch to Samsung. In fact, nearly every company on the list above will tell you they are agnostic when it comes to LED manufacturers or brands.
In the end, LED makers will find themselves in the same boat as makers of flash memory and DRAM. Unit volumes will double and even triple in some years, but revenue will stay flat and profit might decline because of ongoing price wars, shifting customer loyalty and the ebb and flow of worldwide factory capacity. Billions will get spent to stay in place.
Lamp makers, meanwhile, will have a slightly better opportunity to differentiate themselves. Those ceiling lights from Lunera, GE and Cree, for instance, aren’t just aluminum fixtures holding little lights. The light passed through sheets of plastic that containing tiny, specially-grooved waveguides, or tunnels, that disperse light evenly in a room.
A good portion of the technology comes from fiber optics in telecommunications. It’s not just a sheet of plastic.
Switch's IP revolves around dispersing light through a liquid. Lamp makers will face technological and competitive pressures like LED chip makers. But the grounds of competition won’t be around a few immutable technical parameters, such as cost, volume, light output. Moreover, it won’t cost nearly as much to remain in the game.
3. Lamp makers can colonize other segments of the market.
In the past year, companies like Redwood Systems and Daintree Networks have emerged with technology that can remotely dim lights to save power.
Guess what? Lunera already includes a workable version of automatic dimming with its fixtures. It isn’t as granular as those from networking companies -- the system dims in increments of ten percent (i.e., full power, 90 percent, 80 percent, etc.) -- but it’s free.
The Google/Lighting Science bulb allows consumers to build lighting networks with a DSL router and a phone. The only new hardware is the bulb.
4. The customer base and demands are different.
While the world has seen thousands of PC makers come and go, they all basically make the same three products: laptops, desktops and servers. It’s a multi-trillion-dollar market based on shades of battleship gray.
Not so in lighting. Look around your own house. You’ve probably got Edison bulbs in lamps, but if you’ve remodeled in the last decade, you might have hanging track lighting in the kitchen. You can spot the difference right away between a new bulb and a stinker CFL.
Have you ever wondered why you look good, even dazzling, in the mirrors in expensive jewelry or department stores, while you can resemble a petty criminal with a hangover in a bathroom mirror in the back of a dilapidated gas station?
High-end retailers spend thousands a year on lights that can reproduce almost the full spectrum found in nature. Gas station owners go for rock-bottom fluorescents, which can give humans a greenish cast.
In short, the applications, price points and demands will vary by customer, building and need. One of the more interesting lamps at LightFair will come from Acuity. Sources say the company has cracked the code on Organic Light Emitting Diodes (OLEDs). This could mean long-lasting, super-efficient, bright lights measuring less than a centimeter thick.
You could turn your kitchen walls into lights.
So no more comments that LightFair is LEDFair. It’s really FixtureFair.